Saudi Arabia’s non-oil sector continues to perform strongly as the kingdom reviews its plans in the wake of the US’ success in staying on track to become the world’s biggest oil and natural gas producer through new drilling techniques in shale rock formations.

The Saudi American Bank group (Samba) projects the non-oil sector will continue to advance notwithstanding that economic growth would dip below the 5.1 per cent recorded in 2012 and far below the 8.6 per cent recorded in the year before.

“We expect activity in the non-oil sector to pick up a bit in the second half, reflecting both an improving export environment and some increase in government investment. This should see overall non-oil GDP expand by around 4.8 per cent for the year,” Samba said in its quarterly bulletin.

The Samba report envisages the kingdom’s GDP will grow by around $17 billion to $744 billion in 2013 from $727 billion in 2012 and projects it will increase to $777 billion in 2014 before hitting a record high of $803 billion in 2015.

The non-oil advance comes as the US is set to become the world’s top combined  oil and natural gas producer this year. The development prompted Saudi Aramco to decide to produce its own shale gas. That resource will first be used to feed a power plant in Jizan which Saudi Aramco hopes to complete in 2017.

A QNB Group report has Saudi Arabia’s real GDP growing by 4 per cent this year but asserts that the non-oil sector will continue to grow strongly in view of high government-led infrastructure and mining projects. Two years ago, Riyadh committed to investing $67 billion on housing alone to build half a million new homes. One of the Saudi companies capitalising on the infrastructure spending, especially construction of new residential buildings, is building materials manufacturer Qanbar Dywidag Precast Concrete Co Ltd (QDC). The company reported increased demand for its products and services, especially in the eastern and western provinces, encouraging it to pursue plant expansion projects in both areas.

Saudi Arabia will spend $500 billion to spruce up its infrastructure with some $23 billion of the investment going into the construction of the Riyadh Metro while several other railway projects are in various stages of construction.

The mining and metals sector is set to play a major role in the Saudi economy with an integrated aluminium complex in the initial startup phase. The Ma’aden-Alcoa project will use the kingdom’s bauxite resources to produce aluminium of capacity 740,000 tonnes annually and downstream products including those from a rolling mill. Earlier this year, Ma’aden awarded an EPC contract for the first major project in the development of the Wa’ad Al Shammal phosphate complex.

A recent announcement that Farabi Petrochemical Company’s Jazan petrochemicals project is making headway was encouraging news. The company has awarded a contract to a Foster Wheeler subsidiary to make a concept study and select a technology for the plant.

A PILLAR OF SAUDI INDUSTRY

The petrochemicals field constitutes one of the pillars of Saudi Arabia’s non-oil edifice with Sabic making a huge mark on the world stage. Its CEO Mohamed Al Mady says the outlook for the next year is promising with petrochemicals demand in the US, China and Europe expected to grow with the global economy improving. Sabic’s sales in Q3 2013 rose 9 per cent to SR48.8 billion ($13 billion) over the same period in 2012 with sales from the first nine months of this year unchanged from last year at SR140 billion. Net profit in Q3 was SR6.47 billion against SR6.31 billion a year ago.

A cement plant in Yanbu

Sabic is on schedule to bring on stream in 2015 a synthetic rubber plant now under construction at the Al Jubail Petrochemical plant, which now produces ethylene and polyethylene. Abdullah Al Rabeeah, Sabic’s executive vice president for performance chemicals, says pre-marketing has begun to selected clients. “Our rationale is to build customer relationships before the rubber comes on stream.” The new plant’s product range comprises EPDM and polybutadiene rubbers and some 400,000 tonnes of synthetic rubber will be available to markets, particularly in the Middle East. The production will be of interest to the automobile industry for its potential in making tyre and non-tyre goods and to the construction market.

In the same city, at Jubail 2, the Sadara joint venture between Saudi Aramco and Dow Chemical of the US, is building a $20 billion petrochemical complex while nearby Satorp’s complex is getting ready for full production. Satorp, a Saudi Aramco and Total joint venture, will produce refined oil and petrochemicals. Integrated petrochemical units will produce benzene, paraxylene and propylene for which the feedstock is Arab Heavy crude from the nearby Safaniya and Manifa fields.

GOOD RESULTS REPORTED

Players in several facets of Saudi industry have reported good results. For example, food company Savola Group, which has subsidiaries in several countries, reported a 12.9 per cent increase in the Q3 net profit to $122 million compared with the year-earlier period. Dairy producer Almarai, a household name in this region, made a third-quarter net profit of SR475.6 million up from SR450 million in Q3 2012. And Arabian Pipes Company won a $133 million three-year deal to supply welded steel pipes to Petroleum Development Oman. The company has been supplying its pipes to the Arab world and to Iran and Nigeria over a number of years.